Apple Is Currently Down 10% And You’re Already Dead

Recently I have really gotten into the series The Walking Dead.  I love the story lines, the character development, the imagery, and most of all, the plot twists.

But even as the dynamics of the series change on a weekly basis, there is this overwhelming, foreboding feeling I get, that at the end of the day when the final episode is aired, everybody gets wiped out.  It just seems inevitable.

That’s what I feel is going to happen to the masses of $AAPL perma-bulls out there. They are the walking dead, but they don’t even know it.

Hey, you’re dead….and ugly!

This multi-year run in $AAPL is more than long enough to teach a whole new generation of Kool-aid drinkers that “buy-the-dip” is the best way to make money in the stock.  They are convinced that no matter what happens to the markets, or to other stocks, “that won’t happen” to their beloved $AAPL.

They make the iPhone….remember?

But those that have been in the markets for longer than it takes to get a college education know that the music will stop eventually.  It always stops.  And when it does, those without a seat are going to get their heads handed to them.

And the thing is, it won’t even take a massive haircut in the price of the stock to wipe out the $AAPL infected.  Margin will wipe out most of the faithful $AAPL bulls.  The pattern is always the same.

Buy the first dip using SOME of your capital.  Buy the second dip using ALL your capital.  Buy the third dip using SOME of your margin.  Buy the fourth dip using ALL your margin. You never get to the fifth dip.  Those of you who are already on full margin in $AAPL and were down 10% today at the lows know what I am talking about.

For more thoughts on “buying the dip” and avoiding ending up a trading zombie see “The Importance Of A Trading Methodology, Or What Not To Do In Vegas After Getting Shitty Drunk.”

 

Brilliant stuff like this rains down like..well, rain, on my stream during the week. If you want to get wet, follow me on Twitter and StockTwits. You can also pick up my book Trading – The Best of the Best: Top Trading Tips For Our Times by clicking here.

35 Responses

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  4. LMAO!!! WOW 1- all these folks have no sense of humor for starters. 2- What the author here is saying is simple and common sense. What is so hard to understand that the price action and dip buying is not working in this stock? 3- The stock has made 52 lows. Is that not ENOUGH to understand the weakness in stocks? 4- You guys are suckers, you let BL pull your chain lmao
    that is all for now

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  7. Not so sure about your AAPL call, but you are soooo right on The Walking Dead. Can’t get enough of that show. I lose more sleep after an episode than I do worrying about AAPL. Smart money has been on the sidelines in that name for a while.

  8. Brian
    Another great analogy and lesson. You are correct on AAPL> The other people must be margined up the yahzoo thats why they are so defensive..Tomorrow the margin calls will be coming!!

  9. You speak the cold hard truth good sir.
    Also I have to wonder, with so many hedge funds already owning AAPL, where’s the money going to come from to push it to new highs? Retail? Yeah right.

    • thats why it needs a damn split. if they don’t split, they will be stuck in limbo so a split is inevitable unless they just don’t give a damn!! Apple has too much growth potential, too many stock and dividend options to be at the end of their rope. This reads like a very cursory assessment to me

    • you know damn well what that means. you open the stock to a broader investment base with a split and doing such can possibly normalize its valuation relative to its fundamentals. this anti-aapl garbage has been everywhere since 300 meanwhile apple continues to grow revenues at a ridiculous pace. Fiscal cliff nonsense aside, this time next year apple will be sitting between 700-800 with 175$billion on hand while you aapl doomsday prophets still sing the end of the world. the tablet market is still growing internationally, the smart phone market is still growing and Macs continue to eat up PC market share. never mind their next innovation. I don’t get why some enjoy negativity so much

      • you surely know damn well that splitting stock does absolutely positively beyond debate NOTHING to change the value of the company.

        what investment base does it open the stock to? people who have less than $500? stop…

        there was a time, maybe 20 years ago, where it wasn’t easy and cheap to trade odd lots. that time is passed. You can buy 1 share of AAPL at $500 just as easily as you can buy 100 shares at $50.

        ps – I am not an AAPL doomsday prophet

      • A split won’t change fundamentals but apple is undervalued relative to its peg ratio and splitting opens the buying base to the retail (individual investor) as its high price is prohibitive to that base now. As it stands institutional investors are in many cases already saturated with aapl – many own the maximum permitted and cannot buy more. This is a well documented valuation challenge for aapl now – I didn’t make it up.

        There is absolutely no reason for a stock with aapls growth trajectory to trade at a peg of .65. If apple traded at a reasonable peg for its fundamentals it would be a $1000 stock. I assure you a split wouldn’t change apples fundamentals but it would broaden its base and make it possible to capture its unrealized valuation already supported by its fundamentals. It’s is why so many believe aapl is cheap. I have no doubt Brian is a better investor than I but his apple assessment is superficial and unsubstantiated entirely

      • “splitting opens the buying base to the retail (individual investor) as its high price is prohibitive to that base now.”

        says who? how? nonsense. I JUST addressed that point in a comment above.

        ” As it stands institutional investors are in many cases already
        saturated with aapl – many own the maximum permitted and cannot buy more”

        says who? how? nonsense – although I certainly agree with you that AAPL is very widely “owned” at this point.

        if you’re trying to claim that if only AAPL split, then the poor sap who can’t afford to buy $500 worth of stock (1 share), but could afford to buy $50 worth of stock (1 10-1 post-split share) would rush in in such massive numbers that it would change the valuation of the company, well then, I say again: NONSENSE.

        The guys who can’t buy a $500 stock aren’t going to move the needle on the valuation of the largest company in the world.

      • your a tuff customer. there is a LOT of insight out there on this point. i believe a split would also allow aapl to join the DOW, which opens the stock to index funds as well. here is a good forbes read on the subject: http://www.forbes.com/sites/darcytravlos/2012/09/30/five-reasons-apple-should-split-its-stock-and-four-reasons-not-to/

        further reading on the psychological impacts of a stock split as well as subsequent trending post-split:

        http://www.contracts-for-difference.com/strategies/Stock-Splits.html

        apple is stuck in a trading range for reasons unrelated to its fundamentals, though I’d like to hear your thoughts on why its not trading at traditional peg ratios for a massive growth stock that it is.

        I’m simply disagreeing with the day traders and short-mongers out here that trade on emotion and Brian’s post doesn’t speak to a single fact about aapls future. Hes just making a fun connection between aapls recent selloff and one of his favorite shows, but ultimately, his sentiment is completely out of touch with what is really going on at apple. The smart phone and tablet markets alone will grow internationally 200-300% in the next 3 years and apple is a huge part of that space. it is an international marque name that defines markets, has brand cache, continues to penetrate new markets, has a massively loyal customer base and shows absolutely zero signs of having peaked. Give apple 2 years and a $1500 stock price before it plateaus…and thats on the merritts of it’s current product line. you can quote me on that and heckle me endlessly if/when it doesn’t happen.

        Brian, jump in and slap me around :)

      • sounds like were in a wait and see scenario then huh! if his poker theory is as unsubstantiated as his apple claims, sounds like a headsup match in the making :)

      • one more thought to consider – at apples current rate of cash accumulation, half its current valuation will be satisfied by cash alone in less than 2 years. In 7 years, it will have enough cash to fully qualify valuation on cash alone. be smart and don’t listen to this armageddon garbage :)

  10. forgot to mention how apples is penetrating china and other new markets as we squabble about the stock price. when they close the year with $55 billion in 4th quarter revenue and all the whiners (like this guy) that can’t afford the stock, have to eat their words, the rest of us will be enjoying our stock price boost

  11. this is absolute garbage. hes speaking as if apple doesn’t have absurdly solid fundamentals – like the stock is propped up with air. its not. anyone with half a brain knows that apple is UNDER PRICED fundamentally. AND apple still has two aces up it’s sleeve for boosting significantly the stock price, if and when they want. A stock split and a boost to the dividend. Lets not even bother talking about the ridiculous innovation, their incredibly new IMac products, the mini, Iphone 5 production smoothing out, and the innevitable apple television. It’s guys like this that speak from their rear-end that really confuse people no in the know

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